Altruism and beyond by Stark O.

By Stark O.

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Consumption and investment in human capital In every period t a generation is born. 4 Each member 3 4 This simplification is not essential for our results; we can allow for y~ to be somewhat sensitive to coupling with human capital. 2). For simplicity, there is no population growth. The qualitative nature of the analysis will not be affected by allowing nonzero population growth. 36 The timing of intergenerational transfers of generation t has a single parent in generation t À 1 and each parent of generation t À 1 has a single offspring in generation t.

The model Consider an overlapping-generations economy in which economic activity is conducted over in®nite discrete time. In every period t, t ˆ 0Y 1Y 2Y XXXY the economy produces a single good in two sectors: a nonfarm sector in which the production technology requires ef®ciency units of labor, and a farm sector that uses land and physical units of labor in the production process. Production The nonfarm sector Production in the nonfarm sector occurs within a period according to a constant returns to scale production tech35 Altruism and beyond nology which is stationary across time.

How will the distribution of corn be affected by such an increase? Put differently, what happens to consumption choices when the father becomes ``more loving''? Given the interdependence of the utility functions, the answer to this question is not obvious. We know that F , the relative weight the father attaches to the utility of his son, re¯ects the intensity of his altruism. We thus need to examine the sign of a change in the optimal ratio with respect to a change in F . 5). 1 shifts to the left so that, for example, more initial allocations result in con¯ict-free transfers from father to son.

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